After The Debacle Reading Group proposed Bitcoin as an alternative to government-backed fiat currency in An Anarchist Guide to Gold, our interest piqued. So we asked Vitalik Buterin, chief writer for Bitcoin magazine, for an article on the potential of Bitcoin.
STRIKE! is now available to buy in Bitcoin, so you can say he convinced us…
Bitcoin: An International Currency for International Communities by Vitalik Buterin
In the past two weeks I received two paychecks. The first was for 7.6365 BTC, from an employer in Romania for doing some programming work. The three other programmers I was working with were based in England, Israel and China. The second, for 4.16 BTC, was from Bitcoin Magazine, a company with its chief editor in the EU, its CEO and the person in charge of marketing in Atlanta, and myself in Toronto, Canada. When my friends ask about the magazine, one of the questions they always ask is “where are the offices?”, or “where is your company based?”. And to this, I have come up with a snappy, succinct answer: “we’re based in the cloud.” And it’s true: every day, we communicate over Skype, share files over email, Mega and Google Docs, and, of course, send and receive money using Bitcoin. And once everything is put together, the thousands of kilometres separating us from each other fade into insignificance.
The story is a common one in the Bitcoin world. Many Bitcoin businesses were built by a team of founders living on completely different continents who first found each other on an internet forum, and through years of hard work, determination, enjoyment and suffering, and the sometimes chaotic ups and downs of the Bitcoin market, have become not just lifelong partners, but also true friends. It’s true that, in theory, most of the transactions that have been conducted with Bitcoin could have also been done with Paypal, bank transfers or Western Union; in practice, however, in my own experience and that of hundreds of thousands of others, Bitcoin wins by miles.
Part of the difference can be explained by Bitcoin’s intrinsic properties: its fees are indeed much lower; its semi-anonymous and uncontrolled nature allows innovative businesses to grow without fear of getting arbitrarily shut down by Paypal or the banks; and as far as convenience goes, “Give me an address” followed by pasting the Bitcoin address into the “To:” field of a Bitcoin wallet and clicking “Send” is hard to beat. There is, however, another effect at play. If Bitcoin was just about cutting a few percent out of merchants’ transaction fees, simplifying payment forms or breaking the monopoly of the banks, then businesses and landlords would not be giving 20% discounts for making a transaction with Bitcoin when that transaction could just as easily, and legally, have been carried out via cash or Paypal.
Aside from being an often superior method of payment, Bitcoin has also come to serve another function: that of a signalling device. By accepting Bitcoin, what thousands of merchants, employers and employees are saying is: I support the ideals behind Bitcoin, including internationality, decentralisation, individual liberty and the power of technology to make the world a better place, and I want to interact with other people who share those values. When two Bitcoin users meet at a meetup – the Bitcoin conference in San Jose, say – or online, each one immediately knows that the other shares a similar background of basic knowledge, has been through the same experiences – watching the fluctuating Bitcoin markets rise and fall – and shares, at a deep level, a fundamentally similar worldview, even if fairly substantial political disagreements can sometimes hide this fact on the surface. In short, the Bitcoin economy is a perfect fit for the very definition of a community. The difference is, the community in question is not a community of circumstance, but an intentional, voluntary community of ideals – and a community in which anyone can participate..
The idea of such an international, self-organising business community is not new. Thinkers such as Kevin Carson, David de Ugarte and Doug Casey have all come forward to promote the concept and have even given it a name: phyles. A phyle is essentially a transnational community that, as Doug Casey puts it, “is self-defined by whatever values they share.” Phyles would not be based in any one country, although they may have bases in every country, which their members can go to for help. Phyles can be formal or informal to any degree, ranging from a community whose members do not even realise its existence to a fully fledged institutional structure with its own social welfare provisions and tax system.
The possibilities that phyles may bring are unlimited: some see them as the future of cultural development, and many of their more radical proponents see them becoming the dominant form of economic organisation, transcending both traditional corporations and governments in importance.
Bitcoin’s relationship with the concept of phyles is a complex one. Not only is Bitcoin, as a community, itself a phyle, but also, as a currency, it has all the right properties to make it the perfect currency for any phyle to use. Bitcoin does not discriminate on the basis of ideology, race, sex, or religion, it works equally well in any country and across countries, and it does not rely on any existing institution. It is also proving to be a particularly successful currency for making monetary donations – a surprising fact, given that traditional economics teaches that deflation like that built into Bitcoin can only lead to hoarding.
Another property that phyles will have is inter-operability. Unlike nations, which often strive to be insular groups that protect their own even at the expense of outsiders, phyles are intrinsically designed to interact. One can be a member of several phyles at the same time, and phyles will often find it in their interest to pool their unique resources and cooperate on common projects. This, once again, is a property that Bitcoin is perfectly suited for. There are now about half a dozen major “alternative cryptocurrencies” under development that take Bitcoin’s basic features but make substantial modifications to suit their own needs, but under the hood these currencies all speak the same ‘language’. they all use elliptic curve cryptography, atomic transactions and ‘triple-entry accounting’ as fundamental building blocks of their security, and so systems designed for one such currency can easily be adapted to work for any other. Transaction mechanisms that work across currencies are also very possible.
We can see Bitcoin integrating into other communities already. At the conferences so far, we have seen the Free State Project, the civil liberties community, open source software developers and many more smaller groups. Many of the organisations present have benefitted from thousands of dollars worth of Bitcoin donations, and continue to receive many more every week. The next Bitcoin conference, coming this November, is explicitly intended to further this agenda. The conference will bring Bitcoin advocates together with activists of all stripes from around the world, aiming for a general theme of reforming all institutions of society from the ground up – hence the conference’s name, “unSYSTEM”.
Of course, this is only the start. Some organisations have now taken the plunge and reformed themselves to operate on Bitcoin entirely, and more will likely follow suit as the currency continues to expand and its underlying technologies and businesses develop. The next step may be for other more formal phyles to establish their own currencies; so far, the one major attempt to do this is Stan Stalnaker’s Hub Culture, but experiments like Bitcoin (and its cousins, like Ripple and Freicoin) will likely lead the way for more organisations to attempt to do the same thing. The best ones will not be quite so intentional: making a community just for the sake of making a community rarely works out in practice if there are no underlying values that bond the community together. Internet-based transnational currencies and internet-empowered transnational communities are, to paraphrase Epiphyte spokesman Edan Yago, two mutually reinforcing ideas whose time has come. All that’s left is to implement them.
Vitalik Buterin is a chief writer for Bitcoin Magazine
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